EZ Lawn Currency Risk (Scenario)

question 69

Multiple Choice

EZ Lawn Currency Risk (Scenario)
The EZ Lawn Corporation manufactures lawn equipment such as lawn mowers, blowers, and trimmers. The lawn equipment is assembled in the U.S. at a facility in Florida, but the firm outsources inputs from a number of countries, each with varying degrees of economic stability. Given the importance of the firm's sourcing activities, EZ Lawn managers are discussing methods that might reduce the currency risk faced by EZ Lawn.
-Contracting with secondary suppliers outside the U.S. for critical input components would most likely enable EZ Lawn to ________.

• A) limit the amount of debt financing necessary for global expansion
• B) shift production from one country to another in case of currency fluctuations
• C) purchase components based on currency options instead of currency swaps
• D) hedge translation exposure by limiting the amount of interest payments

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Definitions:

Classical Conditioning

Type of learning whereby an unconditioned stimulus that elicits a specific response is paired with a neutral stimulus so that the response becomes conditioned.

Imprinting

Learning to make a particular response to only one type of animal or object.

Sexual Selection

Changes in males and females, often due to male competition and female selectivity, leading to increased fitness.

Natural Selection

Mechanism of evolutionary change caused by environmental selection of organisms most fit to reproduce; results in adaptation to the environment.